At the core of IT Service Management is the ability of the service provider to align capabilities to meet business requirements.  Not only is it expected that the service provider does this but today’s market requires that we provision faster than ever before for the least amount of cost. This requires a shift from looking at costing models that focus primarily on components such as HW, SW, or other infrastructure costs to a model that looks at what is it costing us to provision the end-to-end service.  When we think of Financial Management most will immediately think of number crunching, bean counters, and all those mathematical formulas that go along with that.  It is all of that.  We need to be able to create business cases and to justify the cost of new or changed services in our environment. Financial Management for IT services will certainly include calculations for Return on Investment and Internal Rate of Return as well as assistance in assessing the overall...

We continue our "Best of " blog series by moving into Service Operation.   Cost per Incident Originally Published on August 17, 2010 A reader, upon downloading our ITIL ROI calculator , recently asked the following great question, “how do you determine cost per incident?” Cost per incident is a variation of cost per call or cost per contact, all of which are excellent ways to understand the impact of incidents, calls, or contacts on the business. The calculation is fairly straightforward. Cost per incident is the total cost of operating your support organization divided by the total number of incidents for a given period (typically a month). Cost per incident = total costs/total incidents To accurately calculate cost per incident you must: Log all incidents. You may also find it beneficial to distinguish between incidents (unplanned events) and service requests (planned events). Such a distinction will enable you to more accurately reflect business impact ...

A learner who is working towards developing a Cost Management department recently asked about key performance indicators (KPIs) for the Financial Management and Service Asset and Configuration Management (SACM) processes.      ITIL 2011 actually maps Critical Success Factors (CSFs) to KPIs for each process.   Key performance indicators for Financial Management can be found in section 4.3.8 of the Service Strategy book while those for SACM can be found in section 4.3.8 of the Service Transition book. While I cannot list all of the KPIs for both processes, here is a good sample: Financial Management The financial management for IT services framework specifies how services will be accounted for, and regular reports are submitted and used as a basis for measuring the service provider’s performance. All strategies have a comprehensive analysis of investment and returns, conducted with information from financial management for IT services. Internal service ...

The Professor was recently asked about Application Cost models.  While ITIL does not speak specifically about “Application Cost Models,” there is information about how to create a service cost model using ITIL’s Financial Management process.  From ITIL’s perspective, an application is one part of an end-to-end service. Developing a cost model involves: Identifying all costs attributed to the service (hardware, software, salaries, accommodations, external services, transfer costs (e.g., from other internal units) Determining which costs can be directly tied to the service Deciding how to fairly apportion indirect costs (e.g., infrastructure, technical staff time) Adjusting the total to allow for unabsorbed overhead costs (e.g., administrative or managerial salaries, building/accommodation costs such as a data center or IT office space) A spread sheet can be used to break each cost down into a unit cost.  Overall cost for the application (or service) can then ...